Skewness in financial returns

Peiró, Amado

doi:10.1016/s0378-4266(98)00119-8

Cited by 241 publications

(100 citation statements)

References 24 publications

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“…As stated earlier, empirical studies have shown that asset returns may not be adequately described by the first two moments (Peiró, 1999;Harvey and Siddique, 2000;Patton, 2004;Brooks, et al, 2005;Smith, 2007). In particular, in most situations, the Gaussian assumption does not hold, distribution is skewed to either left or right, and fat tails present in the asset return series.…”

Section: Introductionmentioning

confidence: 98%

“…In the standard portfolio approach, the return differentials should reflect the risk differentials or other financial characteristics. Since returns on financial assets are often found to display skewness and leptokurtosis (see, e.g., Peiró, 1999;Patton, 2004;Brooks, et al, 2005), investors' concerns about portfolio return distributions cannot be fully captured by the first two moments. Otherwise, the portfolio's true riskiness will be underestimated.…”

Section: Introductionmentioning

confidence: 99%

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Do REITs Outperform Stocks and Fixed-Income Assets? New Evidence from Mean-Variance and Stochastic Dominance Approaches

Chiang

Wong

2008

JRFM

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This paper re-examines the performance of REITs, stocks, and fixed-income assets based on the preferences of risk-averse and risk-seeking investors using mean-variance and stochastic dominance approaches. Our findings indicate no first-order stochastic dominance and no arbitrage opportunity among these assets. However, our stochastic dominance results reveal that in order to maximize their expected utility, the risk-averse prefer fixed-income assets over real estate, which, in turn, is preferable to stocks. On the other hand, to maximize their expected utility, all risk-seeking investors would prefer to invest in stocks than in real estate, but real estate, in turn, is preferable to fixed-income assets.

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Section: Introductionmentioning

confidence: 98%

Section: Introductionmentioning

confidence: 99%

Do REITs Outperform Stocks and Fixed-Income Assets? New Evidence from Mean-Variance and Stochastic Dominance Approaches

Chiang

Wong

2008

JRFM

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“…Evidence of studying single asset at a time show that, a typical asset returns have heavier tails than implied by the normal assumption and are often not symmetric (see. Kon (1984), Mills (1995), Markowitz and Usmen (1996) and Peiro (1999). Because of the fat tail in the distribution of returns, several researchers have suggested the adoption of the third and the fourth moments in the Markowitz optimization model.…”

Section: Introductionmentioning

confidence: 99%

Allocation of Assets on the Ghana Stock Exchange (GSE)

Mensah¹,

Avuglah²,

Dedu³

2013

International Journal of Financial Research

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In this paper, we use stock price data between the years 2007 and 2010 to investigate the allocation of assets on the GSE. The Classical Markowitz optimization method shows that, the most profitable portfolio is obtained by investing 90% of wealth in non-financial assets and 10% in financial assets. Risk aversive investor who goes for the minimum risk portfolio has to invest 80% in non-financial assets and 20% in financial assets. We also find that, if the investor decides to split his wealth among the financial and non-financial asset equally, his profit will not be as much as the minimum and the optimum risk portfolio. In effect, there is a reward for risk on the GSE but the Markowitz optimization strategy never exceeds the buy and hold strategy of the market index.

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“…Considerable empirical studies in the literature have focused on testing linear Granger causality between financial and economic variables using Granger's (1969) F test, such as Thornton and Batten (1985), Granger et al (2000), Calderón and Liu (2003). Although they find some interesting linear economic relationships, they may miss some important nonlinear phenomenons, such as the asymmetric effect of monetary policy (Kim and Nelson, 2006) and asymmetric behavior of financial returns (Campbell, 1992;Peiró, 1999).…”

Section: Introductionmentioning

confidence: 99%

Conditional Independence

2009

Lectures on Algebraic Statistics

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We propose a characteristic function based test for conditional independence, which is applicable in both cross-sectional and time series contexts. Our test is not only asymptotically locally more powerful than Su and White's (2007) test, but also is more flexible in inferring patterns of conditional dependence. In addition to our ominous test, we also propose a class of derivative tests to gauge possible patterns of conditional dependence. These derivative tests deliver some interesting model-free tests for such important hypotheses as omitted variables, Granger causality in mean and conditional uncorrelatedness. All proposed tests have a convenient asymptotic N (0, 1) distribution under the null hypotheses. Unlike many other smoothed nonparametric tests for conditional independence, we allow nonparametric estimators for both conditional joint and marginal characteristic functions to jointly determine the asymptotic distribution of our tests. This leads to a much better size performance in finite samples. Monte Carlo studies demonstrate the well behavior of our tests in finite samples. In an application to testing nonlinear Granger causality, we document the existence of nonlinear relationships between money and output, which may be ignored by the linear Granger causality test and Su and White's (2007) test.

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Skewness in financial returns

Cited by 241 publications

References 24 publications

Do REITs Outperform Stocks and Fixed-Income Assets? New Evidence from Mean-Variance and Stochastic Dominance Approaches

Do REITs Outperform Stocks and Fixed-Income Assets? New Evidence from Mean-Variance and Stochastic Dominance Approaches

Allocation of Assets on the Ghana Stock Exchange (GSE)

Conditional Independence

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